Petitioners Ehud Arbit and Issac Rubinstein, along with Dr. Ziv Harish, are named inventors of U.S. Patent No. RE46,823, which covers an allergy testing device. In 2021, Dr. Harish filed a lawsuit in the District of New Jersey seeking to correct inventorship under 35 U.S.C. § 256, alleging he is the sole inventor. While the litigation was pending, the petitioners entered into an agreement with a non-party, Lincoln Diagnostics, Inc., assigning their rights in the patent to Lincoln. Under this agreement, Lincoln agreed to indemnify the petitioners and pay their legal fees. The agreement also required the petitioners to assist Lincoln in enforcing the patent for its own benefit. When the petitioners disclosed that Lincoln was paying their counsel, Dr. Harish moved to disqualify the law firms Banner & Witcoff, Ltd. and Saiber, LLC. The district court granted the motion, finding that Lincoln's financial control and influence over the litigation created a conflict that could not be waived. The petitioners now seek a writ of mandamus to vacate that disqualification order.
The Federal Circuit applied the law of the Third Circuit, which governs the region where the district court sits. Under this standard, a district court's decision to disqualify counsel is reviewed for abuse of discretion. The court found that the petitioners failed to meet the heavy burden required for mandamus relief, which demands showing that the right to the writ is clear and indisputable. The court analyzed the New Jersey Rules of Professional Conduct, specifically Rules 1.7(a), 1.8(f), and 5.4(c). Rule 1.8(f) prohibits accepting compensation from a third party if there is a significant risk that doing so will interfere with the lawyer's independence. Rule 5.4(c) explicitly prohibits a third-party payer from directing or regulating the lawyer's professional judgment. The Federal Circuit agreed with the district court's findings that the agreement between the petitioners and Lincoln conveyed the dominance of Lincoln's interests over the petitioners'. The record showed that Lincoln had directed, regulated, and interfered with counsel's professional judgment, evidenced by Lincoln's involvement in denying settlement offers that did not further Lincoln's interests. The court concluded that the district court reasonably balanced the factors and did not act arbitrarily or fancifully. The district court also noted that any prejudice to the petitioners was limited and partially self-inflicted due to their delay in disclosing the payment arrangement. Consequently, the appellate court determined that the district court did not commit a clear error of law or fact, and the petition for mandamus was denied.
The disqualification of Banner & Witcoff and Saiber remains in effect. The petitioners must secure new legal representation to continue their patent inventorship dispute. The decision reinforces the strict application of conflict of interest rules when third parties fund litigation, particularly where the payer retains control over settlement decisions or litigation strategy. No remand instructions were issued as the petition was denied outright.
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